Bark Corporation Merged into Dog Corporation Two Years Ago

Bark Corporation merged into Dog Corporation two years ago.At the time of the merger,Bark had an earnings and profits (E & P) deficit of $250,000 and Dog had a positive E & P of $200,000.The prior two years have resulted in a positive E & P of $100,000.Despite having a negative E & P of $30,000 for the year,Dog makes a distribution to its shareholders of $270,000.How is the distribution taxed to the shareholders?

A) $270,000 treated as a return of capital.
B) $20,000 taxed as a dividend and $250,000 treated as a return of capital.
C) $200,000 taxed as a dividend and $70,000 treated as a return of capital.
D) $270,000 taxed as a dividend.
E) None of the above.